India's ferrous scrap imports drop nearly 25% y-o-y in CY'24 amid sharp fall in shipments from key suppliers

• Ferrous scrap imports fall to 8.44 mnt
  
  
• Imports from the US down 30% y-o-y
  
  
• Price factor favours domestic over imported scrap
  
  

Morning Brief: India's imports of ferrous scrap fell around 23% y-o-y in calendar year 2024 (CY'24) to 8.44 million tonnes (mnt), as per latest BigMint data, compared with over 11 mnt in CY'23.

Apart from higher usage of domestic scrap, geopolitical conflicts and their impact on maritime trade and freight rates, declining shipments from key geographies, and higher use of sponge iron in domestic steelmaking were some of the major factors weighing on scrap imports.

Grade-wise imports: High-demand grades like HMS imports fell by 18% y-o-y to 4.59 mnt, while MS shredded imports dipped 43% to 1.38 mnt. Specialised grades like MS busheling and motor scrap faced sharper reductions of over 30% each.

Country-wise imports

Extended effects of geopolitical events such as the Red Sea crisis in early 2024 significantly impacted trade flows, with container route diversions and rising freight costs affecting supply chains from traditional routes like the US, the UK and other European countries.

US ferrous scrap exports to India dropped 29% y-o-y from 2.1 mnt in 2023 to 1.49 mnt in 2024 due to logistical challenges and rising prices that made US scrap less competitive. A key factor was the slowdown in bulk scrap bookings from India post-August, limiting material flow. Increasing container freight rates pushed Indian buyers to shift from deep-sea to near shore suppliers, favouring cost-effective alternatives. Higher US scrap prices compared to Australia and the Middle East further reduced Indian buying interest.

The UK's scrap exports to India declined 45% y-o-y from 1.82 mnt in 2023 to 1 mnt in 2024, as domestic demand rose and scrap availability tightened. The Red Sea crisis and soaring container prices in mid-2024 impacted delivery schedules. With delays and higher costs, Indian mills increasingly turned to faster and more affordable alternatives from Australia, New Zealand, and Bahrain.

Australia and Brazil emerged as consistent suppliers, registering growth of 47% and 8%, respectively, partially compensating for reductions from traditional sources.

A sharp decline of 97% was seen in imports from the UAE, with volumes plummeting from 0.38 mnt in 2023 to just 0.01 mnt in 2024 due to the impact of export restrictions.

Imports from Poland witnessed a drop of nearly 35% y-o-y amid bid-offer disparity, which made it less preferable for Indian buyers.

Factors affecting scrap imports

Buyers favour domestic scrap: Imported European HMS (80:20) was, on average, INR 1,500-1,600/t costlier than domestic scrap in CY'24.

India's ferrous scrap consumption, however, rose by 12-13% y-o-y in CY'24, reaching 34.2-34.4 mnt fuelled by a robust 6% rise in crude steel production, which reached approximately 149 mnt from 141 mnt in 2023.

Domestic scrap usage jumped 33% y-o-y to nearly 26 mnt in CY'24, up from 19.51 mnt in 2023, offsetting the decline in imports.

This shift underscores India's growing reliance on domestic scrap generation. Government policies are boosting recycling efforts and scrap generation, although supply falls short of actual demand.

Rise in DRI consumption: India's sponge iron demand/usage rose 9% y-o-y in CY'24, hitting 53.66 mnt compared to 49.36 mnt in CY'23, as per BigMint data. This shows that DRI has an edge over scrap in electric-route steelmaking.

Wide availability of domestic iron ore and thermal coal, lower production costs and higher margins thanks to comparatively cheaper coal, as well as the additional power generation capacity of sponge iron plants through recovery of waste heat from rotary kilns, account for the fact that it is a competing raw material and can replace scrap as a feedstock in domestic IF-based steel production because of easier availability and comparatively lower prices.

Outlook

India's scrap imports are projected to decline due to tightening global export restrictions and growing trade protectionism across the world. The EU's updated Waste Shipments Regulation (WSR), effective from April 2024, will impose stricter controls on the export of ferrous and aluminum scrap. By 2027, non-OECD countries like India will face more stringent environmental criteria for exemptions.

BigMint forecasts a 20-25% drop in scrap imports, with volumes expected to fall to 8 mnt in FY'25, as the import volumes in 9MFY'25 stood at 6.2 mnt. Domestic scrap supply is projected to rise by 10-15% y-o-y to 26-27 mnt in FY'25. While DRI remains a cost-effective alternative, the demand for scrap will continue to grow, driven by steel industry decarbonisation goals.

India is ramping up its domestic recycling infrastructure. To boost scrap generation from the EoL vehicle sector -- a low-hanging fruit -- key measures have been taken, including the Extended Producer Responsibility (EPR) policy in the auto sector, which sets progressive targets for recycling steel from vehicles.

By 2030, the EPR targets aim to recover 8% of steel from vehicles manufactured 20 years ago, rising to 18% by 2035. Additionally, the government has introduced new incentives to scrap older, polluting vehicles, offering up to 50% discount on new vehicles purchased after scrapping old vehicles conforming to BS-II emission standards.